CFO Sentiment: Global uncertainty dents confidence

Yesterday’s Retail Trade numbers continue to reflect the sombre mood of Australian consumers. Nominal retail turnover rose by just 0.2% in May, well below market expectations of 0.5%. The annual growth rate has fallen for two consecutive months and now sits at 3.3%.

Household income growth has improved, but the response in terms of spending has been cautious, as consumers rebuild savings buffers. More broadly, Australian Chief Financial Officers (CFOs) acknowledge the uncertain environment and growing global risks. However, Deloitte’s latest CFO Sentiment report reveals a growing sense of optimism among CFOs about Australia’s economic outlook.

The share of CFOs feeling optimistic about the economy has nearly doubled in the past six months, lifting net optimism in the economy to 23% - its highest level since the second half of 2022. This shows that Australia’s CFOs are increasingly confident that the Australian economy has passed its low point and is now on a recovery path. The start of the interest rate cutting cycle and inflation returning to the RBA’s target band are key factors supporting this improved outlook.

Although sentiment about the economy continues to strengthen, CFOs’ confidence in their own business has softened. Net optimism in respondents’ own business prospects fell to 49%, down 16 percentage points from six months ago. Several factors are likely to have contributed to this. Global tariffs have increased uncertainty around the global economic outlook, and business conditions remain tough as thin margins and weak consumer spending weigh on profits. 

Notably, this is the first time that business and economic confidence have diverged since they were first surveyed almost three years ago. This highlights that businesses are getting more concerned than previously about their ability to navigate a challenging environment.

Although tariffs are contributing to uncertainty, they are only part of the picture. While 84% of CFOs believe they will negatively impact the Australian economy, only 64% believe they will impact their own business, with most adopting a wait-and-see approach towards a formal tariff response. Across a range of possible measures that CFOs could take, only one is more likely to be implemented than not: increased planning for different tariff scenarios.

Instead, CFOs are becoming increasingly concerned about internal business challenges as external economic risks fall down the rankings. The inability to execute strategies remains the top risk for CFOs, who are focused on improving operational efficiency amid challenging business conditions. Meanwhile, technology implementation and digital disruption has moved up the risk register compared to six months ago, increasing by 12 percentage points to 48%. In contrast, CFOs are now less concerned about interest rate movements and an Australian economic downturn with inflation back under control and further interest rate cuts expected. 

With internal challenges supplanting external economic concerns as the top perceived risk of CFOs, there is a growing awareness among business leaders that investment in transformation and technology is needed to boost weak productivity. In turn, nearly one in two CFOs (48%) expect capital expenditure to increase over the next 12 months, up from 35% six months ago. Low productivity growth has been a persistent issue that has been dragging down business and economic performance for years, so it is no surprise that CFOs are looking to reassess and streamline use of technology to improve their own operations.

This newsletter was distributed on 3^rd July 2025. For any questions/comments on this week's newsletter, please contact our authors:

This blog was co-authored by Daniel Kelly, Analyst at Deloitte Access Economics

Click on the links below to read our previous Weekly Economic Briefings:

• Deloitte Access Economics Business Outlook: Productivity promise (25 June)
  
• Tax in Australia: one more piece of sticky tape (16 June)
• Australia’s housing conundrum (11 June)
• Retail Forecasts: Rain check? (04 June)